Mortgage 7 min read • February 2026

Making overpayments on your mortgage is often presented as the "safe" choice. And for many people, it is. But whether it's the smartest choice depends on your interest rate, your tax situation, and what else you could do with the money.

The guaranteed return argument

Every pound you overpay saves you interest at your mortgage rate. If your rate is 4.5%, overpaying gives you a guaranteed, risk-free return of 4.5%. That's post-tax, and it's certain — unlike investment returns.

In a world where savings accounts pay 4-5% but that's taxable (if you exceed your Personal Savings Allowance), and investments carry risk, that guaranteed return looks attractive.

When overpaying makes sense

• Your mortgage rate is high (5%+): Hard to beat this reliably elsewhere
• You're a higher-rate taxpayer: Savings interest is taxed at 40%, making overpaying more attractive
• You value certainty: No market risk, no rate changes, just debt reduction
• You're approaching a rate threshold: Getting below 75% or 60% LTV can unlock better remortgage rates

When investing might win

• Your mortgage rate is low (under 3%): Long-term equity returns have historically exceeded this
• You have ISA allowance unused: Tax-free growth in a Stocks & Shares ISA could outperform
• Your employer matches pension contributions: Free money beats guaranteed returns
• You have a long time horizon: More time = more ability to ride out market volatility

The maths: a worked example

Say you have £200/month spare and a mortgage at 4.5%. Overpaying gives you £200 × 4.5% = £9/month in guaranteed interest saved (£108/year).

If you invested instead and achieved 7% returns in an ISA, you'd make £14/month (£168/year). But that's not guaranteed — some years you'd make more, some less, and occasionally you'd lose money.

The question becomes: is the extra potential return worth the uncertainty?